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Stock Strategist Industry Reports

Fiduciary Rule Puts Greater Focus on Holistic Advice

For now, the rule is likely to be an underappreciated consumer protection.

You've probably already seen a lot of articles on the U.S. Department of Labor's new conflict of interest rule, but what does the new rule really mean to investors, the industry, and advisors?

When it comes to investment advice, advisors are separated into two categories: registered investment advisors and brokers (anyone who is not an RIA). RIAs are required to act in a fiduciary capacity, meaning that all recommendations must be in the best interest of the investor, while brokers have been held to a suitability standard. This means as long as the recommendation is suitable, it doesn't have to be what the broker believes is best for the investor. Translation: Brokers can recommend investments that pay themselves commissions.